I ditched corporate America in 1994 and started a management consulting and venture capital firm (http://petercohan.com). I started following stocks in 1981 when I was in grad school at MIT and started analyzing tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 11th book is "Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision" (http://goo.gl/ygaUV). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass.

$9.99 Ebook Price To Cost Apple $252 Million

The traditional publishing world fears the discounting power of Amazon so much that it sided with Apple in a price-fixing scheme that brought on an antitrust suit from the U.S. Justice Department. If the defendants lose the case (three publishers named in it have already settled) the publishers have the most to lose. It would cost them millions in having to drop back down to Amazon’s ebook prices, which were typically 33% less than what they were charging through Apple’s scheme. A loss won’t matter much to Apple, and such a price cut could save consumers $252 million on its e-books between now and 2015.

CEO Jeff Bezos headed to Seattle in 1994 to be near the warehouse of book wholesaler, Ingram, when he started Amazon. One of the forces that’s been driving Bezos is a vision to create a more direct connection between authors and readers.

And when he looked at the network of participants in the traditional book industry, he saw plenty of inefficiency. After all, between the author and the reader, there was the publisher, the book manufacturer, book wholesalers, and retailers. Bezos achieved initial success by bypassing the book retailers, And his ultimate vision is a world in which authors contract with Amazon to write e-books that readers digest on their Kindles.

And while that would make selected authors and readers better off — since popular authors would end up with more cash and readers would pay less to read their work – the vision Bezos is pushing causes a world of hurt for book marketers, manufacturers, agents, retailers and their suppliers.

Not surprisingly, the publishing industry eventually responded to Amazon. Among its moves, alleges the U.S. government, was collaborating to raise ebook prices. More specifically, the U.S. alleges that in ”phone conversations, e-mails and dinners at exclusive New York restaurants,” top executives of Amazon’s e-book competitors, “colluded to wrest control of the market from Amazon.com and raise prices on e-books.”

Hachette, HarperCollins and Simon & Schuster have agreed to settle the case. Apple plans to fight with Washington while Macmillan and Penguin Group have declined to settle. (Disclosure: I have published books with HarperCollins, Macmillan and Penguin Group.)

Is this much ado about nothing? When you realize that the ebook market in total is only as big as the amount that Facebook paid for Instagram, you could conclude that it may not be that important. But the $1 billion ebook market is expected to triple by 2015, according to Forrester Research, and 21% of American adults have read at least one ebook in the last year, according to the Pew Research Center.

However, traditional books still dominate. For example, Pew’s “2011 survey found that 72% of American adults had read a printed book and 11% listened to an audiobook in the previous year, compared with the 17% of adults who had read an e-book.”

Moreover, there are likely to remain occasions of use when people will want traditional books. Pew found that people like e-books better if they want “speedy access and portability,” but print is the winner for “reading to children and sharing books with others.”

But for traditional publishers, e-books mean higher profits in a world where the trends in traditional publishing are all going in the wrong direction. For example, Digital Book World “conducted a thought experiment” that publishers make 10% profit margins on traditional books and 50% margins on ebooks. And higher ebook sales may explain why Penguin and Simon and Schuster had flat 2011 revenues but higher profits.

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